Big trouble for South Africans earning more than R20,000 per month

 ·7 May 2024

Debt levels for South Africans earning more than R20,000 a month are reaching record levels, where households are now spending two-thirds of their income paying off debt.

The latest DebtBusters Debt Index for the first quarter of 2024 shows that persistently high interest rates and inflation – especially food inflation – continue to erode consumers’ disposable income, while a lack of any meaningful economic growth is constraining salaries.

The quarterly analysis of data from debt-counselling applicants also found that demand for debt management increased, with debt-counselling enquiries rising by 22% and the use of online debt management services up by 30% compared to the same period last year, the group said.

While historically debt problems have been more pronounced in the mass market, middle and upper income bands have also falling into dangerous territory due to prevailing conditions.

South Africans’ debt-service burden is now incredibly high, with households using 62% of net income to repay debt.

The situation is worse amongst higher-income earners.

The debt-to-income ratio for people taking home more than R20,000 per month is 127%, while it is 172% for those earning R35,000 or more. These ratios are at or close to the highest ever, DebtBusters said.

While average unsecured debt levels are up 14% compared to 2016—this is lower than recent quarters and is a welcome trend—top earners have unsustainably high levels of unsecured debt, it said.

“What is concerning is that for people earning R35,000 and more, unsecured debt levels are 41% higher. This is in line with inflation and indicates that without meaningful salary increases, these consumers are using debt to supplement their income.”

The average interest rate for unsecured debt is now at an eight-year high of 25.7% per annum.

According to DebtBusters’ data, purchasing power in South Africa has diminished by 47%.

Nominal incomes are 1% lower than in 2016, while the cumulative impact of inflation over the eight years is 48%.

“While some income groups saw real increase in incomes, on average the trend was slightly downwards,” it said.

Read: Food security warning for South Africa

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